Rational
Hi folks, Paddy here from Odin. We are making it 10x cheaper and easier to launch & invest in syndicates and venture funds. We are now live in private beta.
Want to set up an SPV? Learn more here, or click below to get started. ⬇️
Good Afternoon,
I hope you had a good week, and you’re back in the groove at work.
Today, a podcast with our friends Cyrus and Iman, as well as the usual selection of funny and interesting stuff I’ve read online recently.
Podcast
The Rational VC boys kindly hosted Mary and I at their studio in December.
We had a great time recording this conversation. We chat about our upbringing, what we’re working on and other topics like staying healthy, community, nation state building, memes, European VC vs. US VC, porn & sex-positive culture, our favourite books and more.
“Always just be doing sh*t” is Cyrus and Iman’s motto. I think it’s a great one.
You can listen on Spotify or YouTube:
Best of the Internet
Capital is Not a Strategy
An excellent short piece from Bill Janeway on the dangers of the current bubble in venture capital.
Occasionally, these explosions of investor exuberance have funded the deployment of innovative technologies at sufficient scale to transform the market economy, as was the case with railroads, electrification, and the internet. Whether a bubble is productive depends on what it leaves behind. But all bubbles burst, so even investors in the vehicles of a productive episode inevitably will fall into one of two categories: the quick or the dead.
It will be interesting to see how things play out as the central banks tighten their belts in the coming years. A lot of experienced tech investors have said this bubble makes 2000 look small.
This is something I think about a lot. We help smaller cheque investors access venture deals. The challenge is how to do so ethically and in the best interests of these people.
My personal strategy remains the same - invest very early and very broadly, attempting to index top quartile. I wrote about this here. This has worked well for the likes of Y Combinator, Seedcamp, Kima Ventures and many more over long periods of time. You’re probably ever so slightly less likely to eg. 30x your overall portfolio, but you’re also much less likely to be left holding the bags.
Your chance of 3-xing your money increases about 150% with this strategy, and your chance of losing money falls from 40% plus to basically 0 once you hit sufficient volume.
Here’s some modelling from Steve Crossan (Firstminute Capital, Deep Mind) that supports this thesis:
In terms of sectors, I go for things I can understand, or SPV’s led by people who understand those things. I’m interested in fintech, SaaS, energy & climate tech and biotech. If you’re building or investing in one of those spaces, get in touch. I would love to chat.
By the People, for the People
Kilian from Papercup put me on to a great piece (written two years ago) by Harvey Multani on setting up an SPV to invest in the company you work at. Thank you Kilian for sharing.
This is a smart way for employees to increase their equity stake in a business they believe in, and it provides access to folks who would not otherwise get into the deal. If you’re an employee at a high-growth startup, drop me a line. We can help you do this (and it’s way easier than doing it with AngelList).
YC’s New Deal
The news that Y Combinator will now be investing an additional $375k in portfolio companies has ruffled some feathers. The investment, which is in addition to the standard $125k YC offers for a 7% stake, will convert into equity on “most favourable nation” terms - i.e. the best terms offered by an investor in the next round.
This effectively means clearing out a lot of the space available to angels and seed funds to invest in YC companies post demo day.
It surely makes sense for YC as a business, improving the upside they generate from their portfolio. However, it’s going to piss off a lot of their loyal investor network. Venture capital is a tricky world of frenemies when it comes to competitive rounds.
It’s a Work Event
In case you missed it, UK prime minister Boris Johnson and the rest of the Conservatives have been in trouble. They broke their own rules and threw a party in Downing Street during lockdown in summer 2020. Boris’ excuse - it was a “work event”.
The media has been calling for Johnson to step down. On Friday, members of the British public also decided to voice their concerns:
New Phone Who Dis
The Portland Pickles should definitely just leave this guy to run their twitter.
That’s all for this week
Coming soon, we’ve got new podcast episodes and some more long-form pieces and deep dives.
If you’d like to speak to us about setting up an SPV, get in touch via the links below.
Cheers,
Paddy
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